Overview of ACOs

An Accountable Care Organization (ACO) traditionally refers to a network of health care providers (doctors, hospitals, and other non-physician health care clinicians) who work together through various integration models to coordinate care.

ACOs have historically formed in both the public and private sectors. However, recently, the ACO structure has become one of the many options that policymakers, health services researchers, and patient advocates have explored in an attempt to reduce Medicare spending while improving clinical outcomes and enhanced coordination.

Final ACO rule

On Oct. 20, 2011, the Centers for Medicare and Medicaid Services (CMS) within the U.S. Department of Health and Human Services (HHS) introduced a final rule under the Patient Protection and Affordable Care Act (ACA) to help doctors, hospitals, and other health care providers better coordinate care for Medicare patients. Under the rule, CMS established Medicare ACOs to create incentives for health care providers to work together to treat patients across care settings.

ACOs and Medicare

The introduction of the ACO structure in the Medicare payment system has arisen from the presumption that health care in the United States is fragmented and that much of the high cost of health care stems from duplication of care (labs, tests, etc.) and an overall lack of coordination of care. Proponents of ACOs argue that costs can be significantly reduced by creating a network of providers who can coordinate high-quality, cost-effective care and, through active communication, consequently save money. The aim is to reward high-quality, highly efficient physician practices.

There is a great deal of variability in the structure of entities that are now ACOs, and while it is too early to predict whether the ACO payment system is here to stay, some theories suggest that payment systems based on quality care, patient safety, and cost effectiveness could replace fee-for-service systems.